Shorting a spike like PTEK may sound simple—stock up big on hype and fluff news, me think it go down, me short—but outside of snakeoil world, there’s a few more real world variables to consider. Of course, when I shorted 1,000 shares into a spike at $5.60 (already off its highs though, reducing my risk of further spikage) this morning, I thought it would go down—there was a wall of sellers behind me, buying volume had diminished and if it could take out morning support at $5.40, it could really tank and perhaps go negative on the day cracking $5.15 and then it’d be tough to get much past $4.80-$5 considering that was yesterday’s support.
Buuut it was still green on the day, it was a morning short going for a quick reversal so it wasn’t ideal, and there were big block buyers. Oh yeah and there was that little thing where I have about a dozen writing assignments due in the next 2-3 days—blog posts, AOL & Yahoo articles and LiveStock scripts—so I wouldn’t be able to watch this all day like I typically do.
The good news is I was dead on—within 10 minutes, sellers gradually built strength and got determined enough to take out the buyers at $5.40…expecting to cover into panicking longs who would be fleeing, I placed my buy to cover order at $5.16—just above yesterday’s closing price. My reason—it’s tough to go from big up to big down, unless the situation is truly ideal, so I figured I wouldn’t risk it…a $450ish profit would be enough for me.
But when a few longs did panic, a big order at $5.20 held and it never got to my buy point. As I saw all those sells into $5.20, I coulda woulda shoulda upped my limit to $5.21, a mere $50 less and I probly woulda gotten my entire order.
But I didn’t and when big buy orders of 5,000 and 15k—probly fakes meant to scare shorts—came in in the $5.20s and $5.30s, I said screw it, tae my profit and get some writing done, covering into the ask at $5.40, a safe $180 profit after commissions.
So you can see the trade was good and bad—good cuz I used the variables to tell me a morning drop was likely so it was okay to bend my rules about waiting to short until the afternoon (I can always reshort if perfect fading action occurs) but bad cuz I got greedy and refused to budge from my unrealistic exit price.
Right now the stock is gyrating between $5.20 and $5.40, lots of big buy orders, sellers determined, still green on the day, I hope we get a spike to make the pattern last one more day, but it’s not looking good. While everyone likes to say “oh, it’ll be under $4 by the end of the week” I prefer to focus on predicting small moves, with the chance that they’ll become big ones. This is much safer and more probable than aiming for $1.50/share profits right off the bat.
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PS ROYL did crack support at $8.80, but it was a messy breakdown–meaning lots of buyers everywhere blocking the path to lower pirces–and it didn’t get much further…which actually is a buy signal as now it’s already spiked 75 cents higher…gotta go both ways baby
UPDATE: Reshorted 1,000 shares when it did in fact look like it was gonna go negative on the day at $5.20…got the gradual fade action, took it all the way down to $4.70, but since I was too greedy on the last crack, I didn’t have an open buy order, so I missed that drop, buyers came in on the bid, I covered into the ask at $4.90ish…another $300 in profits for the day…$150 or so in missed profits…but it goes to show how you can make $500/day without being anywhere close to perfect!
Posted in Good Trades, Patterns To Short, Short Selling